Question

RUN TO WISI 18. The reserve requirement is 10 percent. A customer deposits $2.000 into a bank by how much do excess reserves change? A $2.000 B. $1,800 C. $200 D. $100 E SO 19. Use the balance sheet in Exhibit 3. If an additional $8,000 of currency is deposited into the Main Bank, then (x) the bank will be able to make additional loans of $8,000 (y) required reserves at the bank increase by $800 (2) excess reserves at the bank will increase by $7.200 Exhibit 3: Main Bank A. (x) ly), and (2) Assets Liabilities B. (x) and (y) only c. (x) and (z) only Required Reserves $300,000 Deposits $3,000,000 D. (y) and (z) only Loans $2.700,000 E (x) only 20. Suppose the banking system currently has $800 million in reserves the reserve requirement is 10 percent and excess reserves amount to $8 million. What is the level of deposits? A $8.800 million B. $8.000 million C $7.920 million ECO 252-02E Assignment 23 Spring 2020 D $7.200 million E S7,128 million

Answer 1

(18) (B)

Change in excess reserves ($) = 2,000 x (100 - 10)% = 2,000 x 90% = 1,800

(19) (D)

Reserve ratio = Required reserves / Deposit = 300,000 / 3,000,000 = 10%

After $8,000 deposit:

Increase in required reserve ($) = 8,000 x 10% = 800

Increase in excess reserve ($) = 8,000 x 90% = 7,200 = Increase in loan

(20) (C)

Required reserves ($ million) = Total reserve - Excess reserve = 800 - 8 = 792

Deposit ($ million) = Required reserves / 10% = 792 / 0.1 = 7,920